Transportation infrastructure became a hot topic at the end of 2014. So hot, in fact, that it was on the short list of items that had Congress prepared to shut down the government again.
This was an interesting development for those who depend on our nation's highways and waterways—especially because there was little sign that the issue was going to receive appropriate attention before the 2016 presidential election. After all, Congress and the Obama administration have consistently kicked the transportation funding can down the highway since the last long-term spending bill expired in 2009.
In December 2015, both houses of Congress passed a five-year, $305-billion transportation spending bill—known as the Fixing America's Surface Transportation (FAST) Act—finally allowing local, state, and federal government planners to plot out much-needed highway, bridge, rail, and waterway repairs. The bill includes language to streamline processes for new transportation projects, and establishes programs for critical freight projects.
To the freight sector's advantage, the FAST Act will "establish both formula and discretionary grant programs to fund critical transportation projects that would benefit freight movements," according to the Department of Transportation's website.
But still, with such a long gap between transportation spending bills (the bill that expired in 2009 was passed one decade ago in 2005), the measure falls flat. "This is far short of the amount needed to reduce congestion on our roads and meet the increasing demands on our transportation systems," says a Department of Transportation press release.
The American Society of Civil Engineers (ASCE) agrees. The ASCE's Report Card for America's Infrastructure gives America's infrastructure a cumulative grade of D+. The Obama administration had hoped for a bill that would increase spending by 45 percent over five years, but the FAST Act increases spending by only 11 percent, according to a White House statement.
With the current political climate in the United States, it seems lucky that a bipartisan bill passed through Congress at all. This will likely be the last action taken on the issue while President Obama is in office, so transportation, logistics, and supply chain professionals must look to the country's next president to lay out an additional long-term funding plan for maintaining the U.S. transportation network.
To this end, here's a look at what some 2016 presidential candidates are saying about transportation infrastructure.
- Hillary Clinton. Democratic frontrunner Hillary Clinton released a transportation plan of her own, citing a $250-billion budget on top of the FAST Act that would "improve the country's rural transportation, water, and broadband infrastructure," as well as improve electrical grids, according to her campaign's website.
On top of the $250 billion, $25 billion would be put into an infrastructure bank to support an additional $225 billion in loans, guarantees, and other forms of credit enhancement. Clinton's plan cites that it will be paid for through "business tax reform," but isn't specific on the details.
- Bernie Sanders. The Vermont senator proposed the Rebuild America Act, which would invest $1 trillion over five years to modernize U.S. infrastructure. Sanders intends to pay for this plan by closing corporate tax loopholes that allow corporations to keep money in overseas tax shelters such as the Cayman Islands.
- Donald Trump. The Republican frontrunner sees the issue as crucial. "The infrastructure of our country is a laughing stock all over the world," Trump said in an April 2015 Facebook video. "Our airports, our bridges, our roadways—they're falling apart. It's a terrible thing to see." In a more recent October 2015 interview with The Guardian, Trump pushed the importance of spending federal money on mass transit and other infrastructure. "We have to fix our airports and fix our roads, in addition to mass transit, but we have to spend a lot of money," he said. To date, Trump's campaign has not released a specific plan to finance an infrastructure overhaul.
- Jeb Bush. The Florida governor hasn't released a federal transportation policy. In Florida he fought against large-scale projects such as high-speed rail, but also raised the transportation budget year-over-year between 2001 and 2009 a total of 96 percent.
- Ben Carson. He currently has no public platform regarding transportation.
- Chris Christie. The New Jersey governor has no federal plan, but his state struggled throughout 2015 to fund the final year of Christie's five-year transportation plan. Christie fought against raising the gas tax in the state, instead selling bonds to cover the final year's costs.
- Ted Cruz. The senator's campaign doesn't list a transportation plan, but he was a co-sponsor of the Transportation Empowerment Act (TEA) in June 2015, which would have lowered federal involvement in transportation funding and transferred the majority of infrastructure responsibility to the states over five years.
- Carly Fiorina. "Infrastructure is a federal government responsibility, actually. We must invest in our roads and bridges and infrastructure," said the former corporate CEO during an interview on RFD-TV's Rural Town Hall. Her campaign hasn't released specifics.
- Rand Paul. His campaign hasn't published a transportation policy, but in early 2015 the senator co-sponsored legislation that would have paid for transportation infrastructure projects and policy reform through a tax holiday encouraging companies to repatriate to the United States from overseas.
- Marco Rubio. The senator lists a sparsely detailed plan on his campaign website to repair the nation's infrastructure.
While many retailers operate their own cargo fleets, most keep their wheels planted firmly on the ground. But if you believe the rumors, Amazon's cargo fleet might soon be flying the friendly skies.
If there is any company that's always down to try something radical, it's Amazon. The retailer is currently in negotiations to lease 20 Boeing 767 fleets to move its own packages between warehouses and fulfillment centers around the United States, according to The Seattle Times. The purchase would significantly expand the company's secret pilot air cargo operation that allegedly runs through Air Transport International and ABX Air out of Wilmington Air Park in Ohio.
If Amazon is really building its own air network, it seems likely to be in response to the 2013 holiday season debacle in which third-party parcel carriers, held back by inclement weather and a large increase in online shopping, left large numbers of Amazon customers without packages under the tree on Christmas morning.
If Amazon can get an air cargo fleet successfully off the ground, the options for the e-tailer will be as endless as the skies those planes will fly through. Once the operation is established, carriers such as the U.S. Postal Service, UPS, and FedEx stand to lose a significant amount of business. It's even possible that the company might start offering third-party services and become competition for the other large carriers. As usual, for Amazon, the sky is the limit.
With the implementation of its Prime Now delivery service, and increased contracts with smaller carriers, Amazon has proven that it's not afraid to take packages out of the hands of large third-party carriers and deliver them on its own.
The customer is always right…right? This old adage doesn't seem to ring true if the customer demands sustainability. More than 50 percent of consumers are willing to pay at least an additional 5 percent if a product is manufactured sustainably, and 76 percent are willing to wait an extra day for their purchase if it's shipped in a climate-friendly way, according to a study from West Monroe Partners and Supply and Value Chain Center of Loyola University Chicago.
Despite this trend among consumers, 49 percent of surveyed supply chain executives don't view sustainability as a strategic priority, according to the same survey. The study concludes that while there is interest in sustainability among supply chain executives, the budget and resources to implement new programs don't exist.
"Most supply chain teams are struggling to manage the complexities of globalization, the war for talent, and increasing demands, so allocating budget and resources toward sustainability doesn't seem feasible unless companies can put together a business case for the return on the investment," says Yves Leclerc, managing director at West Monroe Partners.
For the 51 percent of executives who do prioritize sustainability, motivations appear to be chiefly about brand image and competitive advantage. But of that number, still only 37 percent have dedicated sustainability individuals or teams.
Unfortunately, sustainability measures aren't always cost effective. It seems likely that many companies won't make a move to be more sustainable until forced to do so by regulation.
Is a green supply chain a strategic priority in your organization?
Source: West Monroe Sustainability Survey
With 2015 in the history books, the trucking industry now finds itself short approximately 48,000 drivers, according to an American Trucking Associations (ATA) report. This is up from a shortage of 38,000 drivers in 2014, and if nothing gets in the way of current trends, the industry could be looking at a shortage of 73,500 by the end of 2016, and numbers as high as 175,000 by 2024, the report says.
It is possible that the shortage might not be as bad as it appears. It's not that people aren't applying for driving jobs, it's that companies aren't getting enough interest from qualified applicants. The applicants are there, but carriers hesitate to hire underqualified drivers because they then face higher insurance premiums and accident rates, among other problems. Nearly 88 percent of fleets responding to a 2012 ATA survey said that most applicants weren't qualified.
The trucking industry will need to hire about 89,000 drivers every year for the next decade, according to the ATA's survey. Replacing retiring truck drivers will account for about 45 percent of new hires, with industry growth trailing at about 33 percent of new hires.
The for-hire truckload sector is hit hardest by the shortage. Private fleet and less-than-truckload (LTL) drivers often receive higher pay and more time at home, so they tend to stick around. If long-haul drivers don't leave the industry altogether, they usually transition into these roles (though even these sectors are also starting to feel the driver pinch).
As we watch the driver shortage numbers climb year over year, it's time to start doing something about it. The ATA recommends that the transportation sector work together to take the following actions before the shortage spirals out of control:
- Increase driver pay. Sign-on bonuses, driver pay, and compensation packages have steadily improved over the past two years. High starting salaries should consistently draw new drivers into the field.
- Enable more time at home. The supply chain must strategically locate facilities in ways that give drivers as much time at home as possible. Much of the driver turnover comes from truckers who simply want to see their families more. If companies can provide this benefit, it's more likely that drivers will stay working in the industry.
- Lower the driving age. Drivers younger than 21 cannot currently cross state lines behind the wheel of a commercial vehicle, leaving drivers between the ages of 18 and 21 unemployable by long-haul carriers. Removing this restriction would greatly expand the available driver pool.
- Improve public perception. Seek out opportunities to influence the public view of trucking as a career in a positive manner. Companies should also make efforts to recruit demographics who don't typically look at the profession, such as women, who make up only 6 percent of commercial vehicle drivers.
- Recruit former members of the military. Initiatives are in place to hire 100,000 transitioning veterans as drivers over the next two years. Many veterans already have the skills necessary to get behind the wheel of a big rig, and only need the civilian certification.
- Treat drivers better in the supply chain. Drivers often complain about poor treatment at shipping and receiving facilities. Companies should encourage employees to treat drivers with respect, streamline processes to reduce wait times, and provide areas for truckers to relax while on site.
- Fast-track research on autonomous trucks. Autonomous trucks are still years away. While perhaps the industry can't depend on automated help in the next few years, it is likely that driverless trucks will be on the road at some point, relieving strain on the long-haul driver pool.
Truck Driver Shortage continues to climb
In 2014, the trucking industry was short 38,000 drivers, according to the American Trucking Associations. The shortage is expected to reach nearly 48,000 by the end of 2015. If the current trend holds, the shortage may balloon to almost 175,000 by 2024.
SOURCE: ATA Truck Driver Shortage Analysis 2015
Atrio of drivers claimed a new transcontinental driving record in October 2015. They clocked the 2,995-mile trip from Los Angeles to New York at 57 hours, 48 minutes. The time is impressive, but it's still more than 25 hours longer than the current record for the trip. But the devil is in the details.
This was the first successful cross-country trip that a vehicle made almost completely on autopilot. Drivers Carl Reese, Deena Mastracci and Alex Roy, all former transcontinental record holders, took the trip in a Tesla S P85D that featured Tesla's new autopilot system.
The semiautonomous technology allows for hands- and pedal-free highway driving, lane changes, throttle adjustments, and steering and braking based on sensor scans. While this impressive (and probably illegal) trip has little to do with the supply chain right now, the implications for logistics applications are obvious.
This feat comes on the heels of Daimler's self-driving trucks beginning road testing on Nevada highways in summer 2015. While all self-driving cars and trucks currently require a driver behind the wheel in case something goes amiss, it suddenly doesn't seem so farfetched that a few years into the future we might have cars and trucks cruising down our highways with no human aboard at all.
Shippers have long memories, so it's not hard for supply chain and C-suite executives to look back through the years to the 1990s and before, when a series of mergers by Class I railroads caused endless problems in the form of derailments, lost shipments, and even accidental deaths. Things got so bad that regulatory agencies wound up passing a series of measures to make large rail mergers "bear a heavier burden to show that a major rail combination is consistent with the public interest," according to the Surface Transportation Board (STB).
But these hurdles aren't stopping Canadian Pacific (CP) from trying. The latest of three successive offers to buy Norfolk Southern (NS) carries an impressive price tag of $28 billion.
Even if shareholders are all aboard, which at this point doesn't seem likely, shippers most certainly are not. Seventy one percent of shippers are against the merger, according to a survey by Cowen and Co. So CP and NS would face not only regulatory hurdles, but a challenge from their customer base as well. Of those opposed in the survey, more than half said they fear higher prices and decreased options, and would officially bring complaints to the STB.
However, even if shippers are opposed to a specific CP/NS merger, they are less opposed in general to the idea of a Class I rail merger than they were at the beginning of 2015. While 76 percent of shippers surveyed in early 2015 opposed the idea of a Class I merger, only 58 percent opposed the idea in the more recent Cowen survey. It's possible that if CP bides its time, at least the customer complications might subside.
Considering Norfolk Southern's rejection of the two previous offers, however, it doesn't seem likely that an acquisition would begin soon, if at all. Even if NS accepted CP's offer, investigations and regulatory approval would take more than a year and a half—and that's if everything went smoothly. Considering the complicated nature of such an acquisition, that doesn't seem very likely either. Still, the fact that the conversation about Class I railroads merging is even happening at all makes plenty of people nervous.
Hoverboards (they don't really hover—they are a type of scooter) were expected to be one of the hottest holiday gifts of 2015. And they were—very hot—because in some cases the boards spontaneously burst into flames.
Amid the holiday hustle and bustle, Amazon, Target, and other major retailers were forced to holiday rush many hoverboard brands right off the shelves and away from consumers, based on whether or not the manufacturer could prove the product met safety standards for lithium ion batteries and other safety criteria. The U.S. Postal Service and several major airlines began refusing to carry the products in their planes at all.
The Consumer Protection Safety Commission (CPSC) began investigating the product after a dozen complaints about hoverboards spontaneously catching fire were verified. "I have directed agency staff to work non-stop to find the root cause of the fire hazard, how much of a risk it might present, and to provide consumers with answers as soon as possible," said CPSC Chairman Elliot Kaye.
The hoverboard problem speaks to a wider issue in American manufacturing: The ease with which U.S. companies can source products from unregistered manufacturers overseas in places like China. While holiday sales surged, and patent battles raged between larger hoverboard manufacturers such as Razor and Swagway, many knock-off hoverboards—built without appropriate safety standards—found their way into the country completely under the radar through online sales.
Consumers can be fairly confident that the CPSC will eventually get to the bottom of the hoverboard problem and pass rules to keep future scooter fires to a minimum. But responsibility also lies with U.S. retailers and manufacturers to look inside their own operations and make sure that the parts they use or the products they sell are from reputable sources. Often the cheapest source of components or finished products is not the best option. As the old saying goes, if it looks too good to be true, it probably is.
Many old school truckers are busy trying to use up the last of their pencils, pens, and paper logbooks. The Federal Motor Carrier Safety Association (FMCSA) finally set a deadline for the long-awaited rule requiring trucking companies to install electronic logbooks in all their vehicles.
While many carriers aren't thrilled about the change, with most citing expense as their largest complaint, the FMCSA says that e-logs will make things easier in the long run. Not only will carriers have better access to data to improve productivity in the back office, but life out on the road should get easier for drivers as well.
With e-logs in every truck, drivers will be forced to comply with Hours-of-Service (HoS) rules, designed to reduce driver fatigue. Additionally, drivers will spend less of their off hours on logs and paperwork, giving them time to get more rest.
The American Trucking Associations (ATA) supports the mandate. "ATA supports FMCSA's efforts to mandate these devices in commercial vehicles as a way to improve safety and compliance in the trucking industry, and to level the playing field with thousands of fleets that have already voluntarily moved to this technology," says Bill Graves, president of the ATA.
But not everybody is as happy with the ruling. The Owner-Operator Independent Drivers Association (OOIDA), for example, argues that the electronic log is pointless because it requires driver input to know if drivers are resting in their off-duty hours.
"The ELD proposal is a 'big brother' mandate that the trucking industry does not need," OOIDA said in press release.
The electronic log debate has been around since the 1990s, and it's not likely that the FMCSA is going to push the deadline again. Truckers should get the ball rolling right away to make sure they have time to vet various providers and technology options.
But carriers can take heart. There's still some time to use those paper logs while saving up their pennies. The new FMCSA rule requires e-log implementation by Dec. 18, 2017. For truckers who already have an e-log device that isn't compliant with the new rules, the deadline extends to 2019.
Statistics show that cargo at rest is at an increased risk for pilferage and full container theft. This is especially true over holidays or extended weekends, which are often marked by increased traffic congestion, crowded truck stops, and a dramatic increase in cargo thefts. Tom Mann, president of TrakLok International, a Knoxville, Tenn.-based cargo security firm, offers a few steps transportation companies can take to decrease cargo theft risk:
Loads at Rest
- Utilize secure lots that provide sufficient barriers to prevent theft or unauthorized access. For example, the compound should have a chainlink fence of 9-gauge material at least 8 feet high and topped with barbed wire, and it should be properly anchored.
- Close truck doors before pulling into the lot so that surveillance efforts cannot see what has been loaded onto trailers.
- Employ the use of security patrols in lots where high-value cargo is staged for transport.
- Use security equipment, such as king pin locks and landing gear locks, to secure trailers while they are being staged. Most important are the use of electronic security locks with active alarm systems installed on cargo doors.
On the Road
- Implement a Red Zone—the distance wherein the driver does not stop after a pickup—of at least 250 miles. Red Zone drivers should be rested, trucks fueled, and all personal needs taken care of prior to a pickup so the Red Zone can be implemented effectively.
- Report any "out of norm" occurrences while loading the trailer or while a shipment is in transit. Drivers should notify dispatch during extended stops at areas such as truck stops and rest areas.
- Remind drivers and warehouse workers to not discuss any details regarding loads—specifically drop locations, routes and contents—with anyone.
- Consider a no-drop policy keeping the trailer married to the tractor so that the tractor and trailer can be secured.
- Use effective access control equipment to maintain integrity while the shipment is in transit. This includes electronically monitored locks that include a tamper detection alarm system and GPS tracking affixed to the trailer doors.
- For high-target shipments, employ multiple layers of security to dissuade or delay cargo thieves.
- Implement regular security briefings to train drivers on surveillance techniques and protocols to follow if they detect suspicious activities.
- Employ a tracking system that includes active and passive alarm systems.
- Utilize a rugged locking system that will notify the driver and security personnel if anyone attempts to breach the trailer door.
If you are a carrier, shipper, or broker who likes to urge drivers to break safety or Hours-of-Service (HOS) regulations, it's time to rethink the way you do business. A new rule effective Jan. 29, 2016, makes any party caught forcing drivers to break the rules at risk of being fined as much as $16,000 per incident.
Throughout a series of sessions held by the Federal Motor Carrier Safety Administration (FMCSA), many drivers told Congress and FMCSA personnel that they are often urged to stick to deadlines so tight that meeting them would require breaking HOS, commercial driver's license regulations, drug and alcohol testing standards, and hazardous materials regulations.
During a four-year investigation, OSHA determined that 253 complaints from commercial drivers had merit. During that same period, FMCSA validated 20 incidents of drivers being coerced to break the rules by the carriers they worked for, according to a statement published on the FMCSA website.
In addition to establishing the new set of penalties that the FMCSA may enforce on violators, the new rule also lays out new procedures for drivers to report abuse, and establishes new rules of practice for the agency to use when investigating incidents of coercion.
The FMCSA says the new rule will not have significant economic impact on carriers, shippers, or other parties who might coerce drivers, and any economic benefit these companies previously gained from forcing drivers to break the law is now offset by the risk of being fined. The agency also expects an increase in driver health benefits as HOS rules are complied with, as well as an increase in safety since drivers will be better rested.
The new coercion rules fall under the Moving Ahead for Progress in the 21st Century Act, or MAP-21, that took effect in 2014.
Albert Einstein was once quoted as saying, "The only thing that interferes with my learning is my education." This pretty much sums up what education has been focused on for the past century. Students were taught to be "book smart" but lacked the business savvy that real-world experience could provide. While times are changing, firms are still struggling to attract, retain, and grow supply chain talent who provide the right mix of applicable knowledge and appropriate skills.
It is clear that universities must produce graduates who are aligned with industry's needs if they are to be a successful source of talent. We know this is important but there are two sides to this coin. One side is the role universities play in preparing supply chain talent. The other side concerns industry's role in identifying critical-to-success skills that universities must provide to ensure students are prepared for the real-world challenges they will face upon graduation, as well as throughout their careers.
Research conducted by the Supply Chain Institute, University of San Diego, was straightforward, interviewing nearly 400 executives in top companies. The survey asked:
- What essential skills and attributes do you seek when hiring supply chain talent?
- What skills will be essential to stay competitive five to seven years into the future and beyond?
What did industry executives say?
- Undergraduate curricula should be broad, covering end-to-end supply chain—including global-issues. No "deep dive" into one particular area (more specialization can and should be provided at the graduate-level).
- Talent should be able to grasp the "big picture"—understand how all the pieces fit together and what the impact is elsewhere in the supply chain.
- Talent needs to know how a company makes a profit—not just focusing on cost reduction or specializing in a particular function.
- Internships provide real-world experience…and the more internships the better.
- Supply chain talent should possess essential (building block) skills and attributes (see chart below).
It was clear that industry wants talent that is:
- Good with information: Possess analytic problem-solving capabilities and the ability to turn data (especially by leveraging big data opportunities) into useful information. They should have a clear perspective of the end-to-end supply chain and the impact of decisions made upstream on the downstream supply chain. Most importantly, they need to understand how a company makes a profit, and the part effective management of the supply chain plays in making that happen.
- Good with people: Possess the ability to work with people across all supply chain functions. They must be effective in developing collaborative relationships with all cultures, genders, and personality types. At the end of the day, they must be able to effectively communicate complex issues, gain buy-in from all stakeholders, and drive the decision making process with confidence.
- Good at execution: Possess a proactive attitude that sees what is needed and takes action without being told to do so. Too often, decisions are made and then not executed on. Effective planning and project management skills are essential to drive the plan forward to realize timely and cost-effective results.
While all these skills are important there is one skill that stands out above all the others—knowing how a company makes a profit and how to apply supply chain skills to maximize that profit. While there are still firms that focus on leveraging the supply chain functions to reduce costs, best-in-class firms understand that effective supply chain management can reduce costs AND grow revenue in a way that maximizes profits and return on investment (ROI).
While there are a number of supply chain skills that industry desires, none is more important, or impactful to a company's success, than understanding how a company makes a profit and the important contribution that supply chain management can play. This is a reason an increasing number of supply chain professionals are being promoted to C-level positions—they know how to improve a firm's profitability.
— By Joel Sutherland, Managing Director, Supply Chain Management Institute, University of San Diego
Remember having to call in sick to work because you ordered three gifts from a catalog and you couldn't afford to miss their delivery before the holidays?
Thankfully, those days are far behind us. We now live in a time when missed package deliveries are almost entirely a thing of the past due to online scheduling platforms and apps.
With another holiday season behind us, consumers have again spoken. They increasingly shop online using devices of their choice at times of their choosing, and they don't just want the things they buy online fast, they want them conveniently.
UPS announced during the 2015 holiday season that its UPS MyChoice platform crossed the 20 million member mark. FedEx offers a similar service with its FedEx Delivery Manager, and even the U.S. Post Office is in the game with scheduled re-delivery online for missed package deliveries.
"Understanding customer needs and creating solutions aimed at improving their delivery experience is an important aspect of gaining market share," according to an Accenture study on the parcel industry. Whether consumers want packages at their door, a drop-off locker, an access point, or a neighbor's house, parcel carriers must be able to meet those demands or risk losing business.
Business-to-consumer shipping is expected to overtake business-to-business in terms of parcel volumes in North America within the next five years. With empowered end consumers becoming the largest customer base for parcel carriers, expect those carriers to continue to do all they can to make the delivery experience as easy as possible.
In today's complex world, supply chains can no longer function effectively without assistance from technology solutions. But those products are sometimes expensive, and not always specific to every operation. The following list from Jim Hayden, vice president of solutions for Savi Technology, highlights the types of solutions supply chain managers will need to meet the challenges coming in 2016.
- The Internet of Things (IoT).—IoT-enabled solutions continue to drive transformational change across the supply chain, enabling global organizations to connect products and processes to allow real-time analysis, anywhere, any time. In the past, as much as 80 percent of analytics project costs were related to preparing and integrating data. Today, industrial IoT-enabled solutions help to easily integrate and analyze sensor data, and show a dramatic return on investment. The IoT market is expected to reach more than $1.7 trillion by 2020, according to IDC research.
- Supply chain visibility.—True supply chain end-to-end visibility will be achieved for the first time in the coming year. Unprecedented availability of sensor-based data and other data sources, combined with advancing abilities to transform big data into usable intelligence, is finally making visibility fully end-to-end. Massive data streams and analytics provide supply chain managers with insights that help them make more informed decisions by simultaneously comparing real-time metrics with past results for more accurate forecasting.
- Purpose-built applications.—Organizations are demanding purpose-built applications. With the speed at which goods are moving, and the rate at which data comes in now, milestone visibility and toolkit approaches are no longer enough. The purpose-built approach produces critical insights that drive action across the supply chain—as supply chains seek to know what happened, what should happen, and what will happen. In addition, implementing a purpose-built application can be done in weeks instead of months.